Why Honda Amaze can be bad news for Maruti

Honda's newly launched entry level sedan Amaze is likely to pose a tough challenge for Maruti Suzuki, India's biggest car manufacturer. The Amaze, Honda's first diesel vehicle in India, is priced aggressively and has already seen decent bookings. Honda Amaze will take on the DZire, Maruti's best-selling and most profitable model. But, it's a battle that Maruti may not relish.
Here's why:
  1. Competitive pricing: The Amaze diesel starts at Rs 5.99 ex-showroom Delhi and compares with Maruti's best-selling DZire, which is priced Rs 500 more. Other cars in this category like the Toyota Etios and the Chevrolet SAIL are costlier. Global brokerage CLSA says Amaze's ex-showroom price is a threat to Swift DZire.
  2. Best economy: That Indian consumers are touchy about the fuel economy is a known fact. The Honda Amaze promises to be the most economical car in the super compact segment, which might give it an edge at a time when fuel prices are rising by the month. Honda claims that the Amaze (diesel) will give a mileage of 25.8 km per litre.
  3. Volumes: Honda volumes have taken a beating because of the absence of a diesel vehicle in its portfolio. Maruti sold more DZires in March than all Honda cars sold in the same month. Honda sold nearly 10,000 units in March 2013 a fall of nearly 9 per cent from 11,000 units it sold a year ago. In contrast, Maruti sold 20,000 units of DZire in March, a jump of 22 per cent against nearly 16,500 units it sold in March 2012. In fiscal year 2012-13, Maruti sold nearly 1.7 lakh DZires, a jump of 54 per cent against 2011-12. Clearly, if there is a churn, Maruti will be the loser.
  4. Profitability: The Swift and DZire models contribute over 50 per cent to Maruti's profitability. If Amaze dents DZire sales, Maruti's profitability will fall. Considering the glut in auto sales, Maruti may be forced to take a price cut, which will further impact its bottom line.
  5. Brand: Honda's brand equity may catalyse higher sales. In the two-wheeler space, Honda has grown exponentially since splitting up with Hero MotoCorp. While, there is no threat to Maruti's dominance in Indian markets, the success of Amaze may lead to interesting times (for consumers) in the passenger car space.


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